Richelieu Hardware Ltd

Sound bite for Twitter and StockTwits is: Dividend Growth stock. I think that the stock price is too high currently, but it will not always be so. When it has a relatively better price it would be a good long term buy. See my spreadsheet on Richelieu Hardware Ltd.

I own this stock of Richelieu Hardware Ltd (TSX-RCH, OTC-RHUHF). I initially bought this stock in 2007 because it was recommend by the Investment Reporter. It was for my Pension Account. I did sell this in 2015 because of the low dividend when I started to withdrawal money from this account. In 2009, I bought this stock for my trading account and I still have it in this account.

Taking both purchases into consideration, I have a total return of 20.5% per year. With the purchase for the Trading account, I have a total return of 22.9%. The portion of this return attributable to capital gains is 21.3% and to Dividends is 1.6%. The dividends over the past 8 years have covered 21% of my purchase price.

This company could now be considered to be a dividend growth company. They have not increased the dividends every year since they started dividends in 2000. However, they have increased the dividends most years. The dividend yield is low. The current dividend is 0.84%. The 5 year median dividend yield is 1.16%, the 10 year median dividend yield is 1.34% and the historical median dividend yield is 1.16%. I would not buy it below a yield of 1%

The dividend growth is moderate. Dividends have growth by 7.8% and 10.3% per year over the past 5 and 10 years. For the stock I bought in 2009, I have earning a dividend yield of 3.7% on my original stock price. This is over an 8 year period. When I bought this stock it had a yield of 1.74%. My dividends grew at just over 9% per year since 2009.

If you bought this stock today at a yield of 0.84% in 5 or 10 years you only be getting a yield of 1.18% or 1.65%. This is based on dividends growing at 7% per year. I used 7% because it is close to the 5 year growth and during last two years dividends have only increased by 6.6% and 6.4% per year. If you start at a very low yield, like under 1% that you do not have much yield after 5 or 10 years. That is why I would not buy a stock with a yield under 1%.

The last thing to mention about dividends is the Dividend Payout Ratios. They are low. The DPR for EPS for 2016 is 19.9%. The 5 year one to 2016 is 21.2%. The DPR for CFPS is 16.8% and the 5 years to 2016 is 17.8%. All are quite low.

The other good thing with this company is the good debt ratios. The Liquidity Ratio for 2016 is 4.42 and the 5 year median ratio is also 4.42. The Debt Ratio is 5.54 with a 5 year median of 5.51. The Leverage and Debt/Equity Ratios for 2016 are 1.22 and 0.22 with 5 year medians also at 1.22 and 0.22 respectively.

The last thing to point out is that the outstanding shares are dropping. They are down by 1.5% and 1.8% per year over the past 5 and 10 years. So to find the real growth you have to look at Revenue, Earnings and Cash Flow rather than the per share values. This can make a difference. For example, the Revenue growth over the past 5 and 10 years is at 10% and 8.2% per year. The Revenue per Share growth over the past 5 and 10 years is at 11.7% and 10.1% per year. The growth is good in both cases, but the real growth is the Revenue growth.

I get 5 year low, median and high median Price/Earnings per Share Ratios of 15.97, 18.88 and 21.79. The corresponding 10 year ratios are 14.03, 15.47 and 16.94. The historical ratios are 12.53, 14.62 and 16.71. Part of the growth in the stock price is due to growth in P/E Ratios. The current P/E Ratio is 22.52 based on a stock price of $27.02 and 2017 EPS estimate of $1.20. This stock price testing suggests that the stock price is relatively expensive.

I get a Graham Price of $13.26. The 10 year low, median and high median Price/Graham Price Ratios are 1.16, 1.29 and 1.43. The current P/GP Ratio is 2.04. This stock price testing suggests that the stock price is relatively expensive.

I get a Price/Book Value per Share Ratio of 2.45. The current P/B Ratio is 3.97, a value some 62% higher. The current P/B Ratio is based on a BVPS of $6.80 and a stock price of $27.02. This stock price testing suggests that the stock price is relatively expensive.

The historical dividend yield is 1.16%. The current dividend yield is 0.84% based on dividends of $0.23 and a stock price of $27.02. The current yield is some 28% lower than the historical yield. This stock price testing suggests that the stock price is relatively expensive.

There are only a couple of analysts following this stock. There is one Buy recommendation and one Hold recommendation. The consensus would be a Buy recommendation. The 12 months stock price consensus is $29.25. This implies a total return of 9.09% with 8.25% from capital gains and 0.84% from dividends.

This company is a distributor, importer and manufacturer of specialty hardware and complementary products. Its products are kitchen and bathroom cabinets, furniture, and window and door. It is also involved with residential and commercial woodworking industry. It has a large customer base of hardware retailers. Its web site is here Richelieu Hardware Ltd.

The staff at Searcy Sentinel has put out information from indicators on this stock. This stock has a Value Composite score of 46 which basically says that the stock is neither over nor undervalued. Joseph Solitro of Motley Fool likes this stock. See what analysts are saying about this stock on Stock Chase. They like it as a niche player.

The last stock I wrote about was about was Goodfellow Inc. (TSX-GDL, OTC-GFELF)... learn more . The next stock I will write about will be Enbridge Inc. (TSX-ENB, NYSE-ENB)... learn more on Wednesday, March 15, 2017 around 5 pm. Tomorrow on my other blog I will write about Buying Bonds... learn more on Tuesday, March 14, 2017 around 5 pm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter or StockTwits.